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1. Using Exhibit 1 and other industry data, carry out a Porter’s Five Forces analysis on the Cloud Computing Industry. (15 marks)

Financing Business Initiatives

Your summative assessment for MSc Management with Finance, Financing Business Initiatives has TWO elements and they MUST be submitted on the same document:

1. a Consultancy Report submission for 80% of your marks (excluding the title, references and quotations).

2. a Reflective Statement on the top challenges facing the financing of new business initiatives in a market of your choice for 20% of your marks (excluding the title, references and quotations)

You are a recently hired Financial Analyst working on the Leveraged Buyout (LBO) deal desk for 3M, a small Private Equity (PE) firm with a strategic investment remit for high growth technology companies. Your first task is to review the case company Bottomline Technologies as a potential investment and prepare a report addressing the following requirements:

1. Using Exhibit 1 and other industry data, carry out a Porter’s Five Forces analysis on the Cloud Computing Industry. (15 marks)

2. Identify and critically evaluate the characteristics of a company which would be suitable for an LBO. (6 marks)

3. Explain how a Private Equity (PE) firm such as 3M could align their interests to the managers of Bottomline Technologies. (6 marks)

4. Discuss the typical LBO sources of finance and a typical debt financing term structure. (10 marks)

5. Based on the financial information and assumptions in Exhibit 2, undertake a DCF valuation for Bottomline Technologies identifying the intrinsic equity value of a share. Outline the assumptions used and explain your calculations and workings. (15 marks)

6. Based on the financial information and assumptions in Exhibit 3, undertake a LBO valuation for Bottomline Technologies, identifying the IRR that will be generated on equity assuming an exit in year 5. Outline the assumptions used in your calculations and explain your workings. (10 marks)

7. Evaluate possible exit strategies for 3M if it was decided that the investment in Bottomline technologies should go ahead.(8 marks)

8. For potential investors into the 3M fund explain private equity fund structures, fund terms, economic terms and corporate governance terms used by typical PE firms

Question 1 Using Exhibit 1 and other industry data, carry out a Porter’s five forces analysis on the Cloud Computing Industry.

Question 2 Identify and critically evaluate the characteristics of a good LBO candidate company

Question 3 Explain how a Private Equity (PE) firm such as 3M will align their interest to the managers of Bottomline Technologies.

Question 4 Discuss the typical LBO sources of finance and a typical debt financing term structure.

Question 5 Based on the financial information and assumptions in Exhibit 2. Undertake a DCF valuation for Bottomline Technologies identifying the intrinsic equity value of a share. Outline the assumptions used and explain your calculations and workings.

Question 6 Based on the financial information and assumptions in Exhibit 3. Undertake a LBO valuation for Bottomline Technologies identifying the IRR that will be generated on equity assuming an exit in year 5. Outline the assumptions used in your calculations and explain your workings

Question 7 Evaluate possible exit strategies for 3M if it was decided that the investment in Bottomline technologies should go ahead.

Question 8 For potential investors into the 3M fund explain private equity fund structures, fund terms, economic terms and corporate governance terms used by typical PE firms.


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